The Corner

Gop Big Spenders?

Is Bush spending too much money? Possibly. It may be heresy to say so (at least around here), but there is one area where the Feds may not be spending enough, and that’s in helping the states through their current fiscal crises. There’s no doubt that the states went on an irresponsible spending binge in the 1990s, and there’s no doubt that repeated federal bail-outs of the states run the risk of creating a significant moral hazard, but government is about facing matters as they are – not as they should be. There must be a significant danger that any chance of a sustained recovery will be choked off by a forced contraction in the states’ spending and/or tax increases at the local level as the states confront their budgetary shambles. Raising taxes and cutting spending at this stage in the economic cycle makes very little sense and may well offset the stimulative effect of tax cuts at the federal level. The administration, however, doesn’t seem too concerned.

It should be.


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